The sale failed and he still owns it.One of the potential solutions is to use an SBA 504 loan for the real estate. 

We financed this deal using a residential VA Loan.

There's no current loan on it right now.

@Jake Baker  You should think about a rehab loan if you are going to buy and hold.

Possibly break loan covenants and can't cure default, lender takes back property.  

Right now, the best offers around me are for some 1.3-4 million, that only generated around 100k per year gross, so there would be a high chance of not cash flowing, and paying money, especially with a commercial loan (these buildings have more than 4 units).I was thinking that although the rental itself does not generate money, I would be able to deduct the mortgage interest, and depreciation from my personal w2 income and would be net positive.

The DSCR loan would allow you to qualify based on the rent you are collecting and get up to 75% of the value (175 x 0.75 = 131.25k, minus 20k payoff and closing costs.You could get a line of credit or a bridge loan against it to borrow money, but it would be higher interest.

One thing I continue to think about is how valuable 2-4 unit properties are becoming, and will continue to be, since Fannie/Freddie took the income restrictions from the 5% down conventional loan option for house hackers. 

There was also a loan grant available from the state of NH for first time home buyers for 3% down payment assistance.

Build - rent - refinance -repeat. in columbus ohio you are buying old houses that are 1900 or 1920 or 1940 and you are in a sellers market. on the other hand you can source land which is a buyers market and build single family homes or duplex or triplexes that will return by renting and pulling cash out on a DSCR loan and doing it again. there aren't a lot of strategies that do this. flipping is different. so many risks. but when someone has a well oiled machine it's all good and less risk.